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Closing the gap
Supply Management – 20 July 2006

Uniting Transport for London's fractured purchasing teams was difficult. Faiza Rasheed, head of TfL's policy, strategy and best practice unit, tells Mark Smulian how she did it, increased efficiencies and saved money

Pulling together procurement operations that buy everything from underground trains to office supplies is a task some organisations might shy away from. But Transport for London (TfL) has little choice. It buys 5 billion worth of goods and services a year. As an agglomeration of eight predecessor bodies covering London's Underground, taxis, buses and trams, the spend is also hugely complex.

Its senior management have come under heavy political pressure to make efficiency savings that could be redirected into services.

After a three-year change programme, TfL now has common procurement policies and is organised to reap the benefits of economies of scale, closer relationships with suppliers and its staff's specialist knowledge.

The challenge

So what did it do and how did it marshal such a range of disparate groups? Rationalising the operations it inherited and seeking these savings presented TfL procurement with two daunting challenges simultaneously. It brought in Faiza Rasheed from Accenture in 2003 as head of the policy, strategy and best practice unit in group procurement to work with TfL's 200 procurement staff.

Rasheed explains: "Prior to the new group purchasing policies, TfL operated in a devolved way, with each business unit having its own procurement function. We needed to gain buy-in across the silos that had traditionally existed."

There were multiple difficulties, says Rasheed. The former bodies were very transactionally focused. "There had been no co-ordinated plan or strategy for where the procurement function should be in the longer term," she recalls.

There was little process standardisation and what did exist was subject to "a lot of local tweaks, with someone in an office doing something differently from elsewhere".

A key task was to get TfL into a position where it could leverage its spending, since the old structure made it "difficult to establish what the baseline spending was", she says.

Some staff were qualified in procurement, but many were administrators who had taken on buying work. Different cultures prevailed in different parts of TfL, which had been bolted together and knew little of each other.

A "central-led activity network" model was adopted in 2004 to capitalise on the huge spend. TfL's efficiency savings target was 99 million over 2003-06 and that was exceeded, with 155 million worth of cashable savings by March this year.

Most savings came from surface transport and London Underground, although an unexpected 20 million was contributed through keener contract prices achieved by London Buses by reducing use of cash fares.

Supplier relationships

Rasheed decided to instil a "buy it once" approach so that TfL would no longer procure goods or services from the same suppliers on multiple occasions from different departments.

"Our suppliers knew more about us than we knew about them, because they had relationships with different parts of TfL but nobody here was looking at them. That destroyed our leveraging power," she says.

One of its big spend areas is on consultancy services, from business processes to engineering design. In the past the same firm might sell services to different parts of TfL, preventing the organisation aggregating its buying power.

Now individual account managers have been allocated a particular supplier or market to deal with, so that they could accumulate knowledge of them and of TfL's overall requirements.

"Now one person who keeps an eye on 'consultancy X' across TfL would know what they are trying to sell us and can leverage that spend by bringing it together.

"When specialist areas are the responsibility of account managers, they will know their market, be more market-focused and gather intelligence, which was not done regularly before," she says.

In some cases "buying once" means that a part of TfL with a particularly strong demand for a commodity or service buys for the whole organisation. For example, London Underground has a voracious demand for power to run its trains and so it makes sense for it to buy energy for the whole of TfL.

Changing focus

Processes and procedures have been standardised across TfL to improve efficiency and create greater career opportunities for staff. Rasheed's team concluded that while no significant staff reduction was needed, some would need to change the nature of their work. There was also an increased focus on management. In addition to the lack of qualified staff, there were no key performance indicators available from the predecessor bodies to assess their work. To address this issue, Rasheed has created a procurement technical competency framework "so for the first time TfL procurement people could be measured on a consistent basis on their technical know-how".

While many staff had a procurement background, some needed specialist skills to manage new responsibilities. To that end, several are being sponsored to study for CIPS qualifications.

Further, there was a need to raise the profile of procurement. Rasheed's task was to get it taken seriously by the rest of the organisation and not viewed simply as an office to which one sent purchase orders. Procurement staff had to gain acceptance at the beginning of projects.

"We are a big project organisation and new projects require specialist knowledge of how to operate in particular sectors," she explains.

"I said that I needed procurement people to be geared up to get into big projects such as the East London Line extension early on in the discussion, not at back end as tended to happen, so they could contribute expertise at the start of the project."

Procurement specialists are now there before the supply chain is in place for large projects, to build partnering relationships.

How have things gone? Rasheed says the timeframe was short for the reorganisation needed. Her greatest challenge was to convince procurement staff to see the bigger picture in the changes. In addition to communication roadshows and monthly meetings, her team "did a lot of the legwork to get people's views incorporated.

"The most difficult thing is to get people to accept emotive issues around changes to organisation design and reporting lines, and that needed perseverance."

Like London buses, procurement challenges come in threes. After this first "classic process redesign" the next issues will be implementing the Mayor of London, Ken Livingstone's policies on sustainability and opportunities for SMEs to trade with TfL.

"Integrated transport" is a Holy Grail that has been much discussed but never fully implemented. Integrated procurement puts TfL part of the way there.